Money & You – May 2013

Planning When You Don’t Want To

By Tommy Haws

Recently I was invited to participate in an uncomfortable situation.  I was asked to consider my own mortality.  Aging and retirement are in each of our futures.  Every time my mother had a birthday and was a little older, she would comment, “It’s better than the alternative.”  Even she, now, has experienced the alternative.

How do we plan for something that at once is very enticing – looking forward to the time when we do not have to work every day – and very frightening – what if the money runs out, what about aging, long term care, etc.? For most of us, it is just easier to pretend it’s not ever coming and live in our current world.  The reality is that each of us must plan for the future.  The good news is it does not have to be painful to do so, if you follow a few basic principles.

Get Started
There is a story told of a couple that bought a large home on some land that needed a lot of attention.  As they started the process of clearing old brush and vegetation, trimming trees and thinning the yard, they started a large pile of branches, stumps and brush in the back of the home.  Over several years, they added to the pile.  It grew until it was a very large eyesore as well as a home for unwanted critters.  Then news arrived that the community they were part of was going to be hauling all of this type of unwanted material away for free and mulch it for the public parks.  The only catch was that it needed to be at the curbside for the free service to pick it up.

The couple began to devise plans to move the large pile to the curbside.  They tried pushing.  Then they tried pulling.  Then they thought a large tarp could be used to drag the pile.  Tractors would tear up the beautiful lawn, so they dismissed that one quickly.  How were they going to address this concern?  Then, like all common-sense solutions seem to come, a bolt out of the blue hit them.  Just move the pile like it got there, a bit at a time – one piece at a time.

The couple then started the task, branch-by-branch and bit-by-bit.  It took some time, but less than they expected.  They moved the pile over the course of a couple of days and the problem was solved.

But the lesson in this was that no idea, however simple or grand, can ever happen without some action.  They just needed to get started.

The same thing happens to us as we contemplate retirement planning or other things that might seem too insurmountable now.  Move the pile by just getting started.

Easiest money to save is money you never see
If your employer offers a retirement plan such as a 401K, make sure that you use it.  Have the money deducted before you ever see it in your check.  This money is so easy to save since there are no problems in being tempted to use it on today’s needs when it is earmarked for tomorrow’s instead.

If you do not have an employer to do that, I suggest that you have it taken out by your bank on a certain day each month.  It can be swept to an IRA or a savings account on a regular basis.  IRAs are an excellent way to save because they too have penalties attached for their premature use.  This allows us to save for the future without that temptation to use it before it’s time.

Consult a professional
Financial planners can help you come up with a game plan based on your circumstances, your needs, your wants and your plans.  It is important that you tell them all you need so that there is a way to enhance the opportunities for meeting those goals.

Some rules of thumb, however, are to plan on living on about 70% of your final year’s annual income and living longer than what your parents might have seen.  People are living longer, which has resulted in most of the workforce working longer.  Factor those into the equation.  You can also decide whether or not you want to rely on whether Social Security will be in place to supplement what you save, because Social Security alone will not be sufficient to live on if it is still there.

Start early and be persistent
The earlier you start, the more likely you will be to be able to meet your goals.  The longer we wait, the harder the pile is to move.  Persistence is also part of the program; make sure that it is just as important to pay your future self as it is to pay your bills, etc. now.  You might need to sacrifice some things in the short term, but your later years will be more comfortable if you are steady in your planning and actions.

Just like that pile of branches was not going to move itself, our future is not going to work itself out, either.

One more quick analogy.  When I was a young boy, I had the chance to help my brother build a home on the La Plata highway north of Farmington, NM.  My nephews and I would stay overnight up there even when others headed back to town 20 miles away.  In the hot summer days, we would swim and play in the relatively calm La Plata River that ran through the property.  We loved to make boats out of branches or leftover 2x4s from the construction.  We would make sails, etc. for the boats, but they really just followed the current.  We would race the boats across an imaginary finishing line and retrieve them and go again.

There was no control, just the current and the path of least resistance to determine where those vessels would end up.  When allowed to go far enough, most of them just ended up in a little whirlpool or eddy along the bank of a bend in the river.  There they would just stir and spin, going nowhere.

Our future, if left without a rudder or power source, often ends up the same way – stuck going in circles and not where we wanted it to be.  When we do not plan for the future, we are like those toy boats of my youth, subject to outside forces to determine its destiny.  You either act or you are acted upon – that is a law of the universe.

Choose to act and not be an object that is acted upon.  Choose to move your pile of branches, so to speak, and plan for the future, because, whether you want it to or not, it is coming!

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